2. Contents
1.1 Abstract 3
Keywords 3
1.2 Introduction 3
1.3 The Understanding 4
1.3.1 Knowledge 4
1.3.2 Knowledge Economy 5
1.4 The Challenges 6
1.4.1 Managing in the Knowledge Economy 6
1.4.2 Knowledge Elicitation 6
1.5 The Survival 6
1.5.1 Managing in the Knowledge Economy 6
1.5.2 Cultivate knowledge networks and an on-going learning environment 7
1.5.3 Implement an efficient innovation and information system 7
1.5.4 Knowledge management 8
1.6 Conclusion 8
1.7 References: 9
1.8 Author(s) Profile: 10
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3. 1.1 Abstract
Knowledge is the most happening buzz word around the world today. Yet surprisingly
it is also the most misinterpreted term across the industry. Hence, it is essential to
step back little and ask - What is knowledge? The answer to this very basic question
itself will help understand the phenomenon known to us today as “Knowledge” and
how it is shaping the new age economy.
The objective of this paper is to decipher the basic concept of the term knowledge.
Expand that understanding to decode how it is driving businesses and economies in
India and around the world. These insights should help one understand the
opportunities and challenges in the knowledge driven economy.
The paper aims to clear the understanding on basic terminology - data, information,
knowledge and wisdom – in business context. These terms are so often used loosely
and interchangeably in various forums.
Finally, the paper aims to emphasize the need of establishing a knowledge
management framework for better business decision making, to survive and grow in
the knowledge era.
Keywords
Data, Information, Knowledge Economy, Knowledge Management
1.2 Introduction
In the last couple of decades knowledge has become the most important factor, in
economic context, in determining the standard of living, more than land, tools, and
labor. Most advanced economies around the world today are knowledge economies.
The new wave of economic growth is coming from knowledge based businesses.
However, there is no clear consensus on what knowledge is and what is knowledge
economy?
This paper attempts to throw some light on basic terms such as data, information, and
knowledge, and their differentiation which are widely used in the context of knowledge
economy. It also discusses a few prevailing definitions of knowledge economy. It
highlights the key differentiators of knowledge economy in comparison to industrial
economy.
The paper highlights the key challenges faced by organizations and managers in the
knowledge economy. Finally, it includes a few recommendations on what to focus on
and how to manage in the knowledge economy to overcome these challenges and
grow.
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4. 1.3 The Understanding
1.3.1 Knowledge
We're drowning in information and starving for knowledge.
- Rutherford D. Rogers
What is knowledge? In a digitally wired world when so much information is available at
the click of a button or hidden in the million search result pages, how does one make
any sense of it to apply it to improve our life. It is imperative in today’s competitive and
fast changing world that one has to be on top of things, all the time and not be
overwhelmed by the information overload4. It is worthwhile to take a step back to
understand what we are dealing with day in and day out.
Although the term knowledge does not have any single definition, in the context
information age concepts it can be logically represented as progressive evolution as
shown in Figure 1.
Data -> Information -> Knowledge -> Wisdom
Figure 1
Data – raw data represents facts, transactions, records, etc. which can be stored and
retrieved, as required, from a database system. The raw data in itself does not contain
any intelligence, but is the main source and starting point on the journey of knowledge.
According to Stan Davis and Jim Botkin 2, data are the building blocks of the
information economy and of knowledge based business.
Information – information is the outcome of data analysis and/or processing i.e.
information is a product of operation by which it becomes such – namely, a shaping or
packaging to make it manageable, transmissible and consumable 10.
Knowledge – knowledge is to know what data to capture, how and when to
process/analyze data. Knowledge is considered to be something abstract and hidden
in people’s minds. According to Mario Alexandrau 1, one can categorize knowledge
into explicit and tacit. Explicit knowledge is logical, structured and can be captured by
various ways. The logic can be coded into building knowledge based or expert
systems. Tacit knowledge is more abstract and involves intangibles like experience,
judgment and intuition.
Wisdom – wisdom translates into making informed and timely decisions, based on
available knowledge. A short story:
Once upon a time, three young students went to a distant town for education. They all
studied very hard and acquired great knowledge in their respective subjects. On
completion of their course, they were returning home and were travelling through a
jungle. They spotted a skeleton of a lion under a tree. One of the students said he can
transform the skeleton into a body. To demonstrate his learning’s, he transformed the
lion’s remains into a body with blood and flesh, as if the lion had just died. The second
student said he can put life into a dead being. The third student suggested it is
probably not wise and they should continue with their journey. The second student
insisted on demonstrating his learning’s and went ahead to put life into the dead lion.
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5. The third student climbed on a tree. The lion once alive immediately killed the two
students and ate them.
All the terms discussed, in way address chime with basic questions of what, how,
when, and why, in that order. The question where is becoming irrelevant given the
globalized and connected world we operate in today.
It is important to note that the representation shown in Figure 1 is not a scientific
theory and not necessarily a linear progression. It is view developed to build an
understanding of the terms we encounter on daily basis, help decipher their meanings
and apply this understanding to deal with the information overload.
1.3.2 Knowledge Economy
A creative economy is the fuel of magnificence.
- Ralph Waldo Emerson
Over the last 200 years economies, in the west and most part of the world, have
moved from being based on agriculture to industrial to now knowledge. The change
from agricultural economy to industrial economy took around 100 years while the
change from industrial to knowledge based economy took just 20 years10. What is
knowledge economy?
Peter Drucker coined the term “knowledge economy” way back in 1968 in his book
The Age of Discontinuity 9. He had predicted that spread of information would cause
major changes in economy. U.K. Dept of Trade and Industry 14, captures the essential
elements of knowledge economy definition, “A knowledge driven economy is the one
in which the generation and exploitation of knowledge play the predominant part in the
creation of wealth.”
More often than not, knowledge economy is considered to be synonymous with
Information Technology revolution. However one should understand that knowledge
has always played an important role in agricultural and industrial economies as well.
But the degree of incorporation of knowledge and information in economic activity is
so profound that it is transforming the basis of competitive advantage 6. Another
misleading notion is that a knowledge economy is a services economy. Actually,
information and knowledge add value to the basic products which leads to closer
integration between manufacturing and services into complex chains of creation,
production and distribution. However industries concerned with creation, production
and distribution remain at the heart of the economy.
Some of the key differentiators of knowledge economy 6:
Information Technology revolution – is leading to codification of knowledge and
facilitating knowledge sharing at minimal cost, thus causing the knowledge to a to
acquire properties of a commodity.
Flexible organizations – utilize human capabilities and knowledge to attain higher
productivity levels through economies of scope in the production of a diversity of
more customized products and services, without sacrificing economies of scale 16.
Knowledge, skills and learning – information and communication technologies
have reduced the cost and increased the capacity of organizations to codify
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6. explicit knowledge, process and communicate information. This is leading to
shortage of tacit knowledge and it has become more important than ever.
Innovation and knowledge networks – the success of organizations has become
more reliant on their effectiveness in gathering, absorbing and utilizing knowledge,
along with its creation.
1.4 The Challenges
1.4.1 Managing in the Knowledge Economy
Managers across industries, at every level, are struggling to adapt to unfamiliar
circumstances and competition in the knowledge economy. The age old management
tools box of total quality management, continuous improvement, outsourcing,
downsizing, business process re-engineering and so on, is increasingly falling short to
help corporate enterprises to survive in the new economy. The General Motors and
IBMs are forced to go through radical changes by the turbulence caused by
emergence of new competition in the knowledge economy. It is evidently clear that
getting a hold on how to manage in knowledge economy not just requires age old
management programs, but a changed mind-set 11.
1.4.2 Knowledge Elicitation
In agricultural economy land was the key resource. In industrial economy raw material
and labor were the key resources whereas in the knowledge economy knowledge is
the key resource10. The knowledge as we understand resides in people’s mind. So
knowledge elicitation is the key challenge in today’s business world – how to identify
knowledge that adds value, how to acquire it, how to develop it, and keep it 1. Also, if
knowledge is in people’s heads it can walk out of the door and not return, either by
attrition or downsizing.
1.5 The Survival
1.5.1 Managing in the Knowledge Economy
The first problem for all of us, men and women,
is not to learn, but to unlearn.
- Gloria Steinem
Managing in knowledge economy demands a qualitative shift in the way manager’s
manage, companies compete and business is conducted. The revolution in
information and communication technologies has made knowledge competitive
resource. As the knowledge resides in people’s mind, the manager’s primary job is to
create an environment that allows knowledge workers to learn from their own and
others experience, and from internal and external environment.
As people become central to organizations survival, people management has gained
significance like never before. Critical Chain project management 3 becomes more and
more important than traditional Critical Path approach. In the knowledge economy, the
manager’s most important job is creating trust 11. W. Chan Kim and Renee Mauborgne
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7. recommend a Fair Process management tool 8 for companies struggling to transition
from production-based to knowledge-based economy in which they emphasize on
ideas and innovation leading to value creation for organizations. The central finding of
their research is that employee’s will commit to a manager’s decision – even one they
disagree with – if they believe that the process the manager used to make the
decision was fair.
1.5.2 Cultivate knowledge networks and an on-going learning
environment
Knowledge is of two kinds. We know a subject ourselves,
or we know where we can find information upon it.
- Samuel Johnson
Generation of knowledge is typically thought to be a process internal to a single entity,
but it is increasingly a product of networked entities, often differently situated yet
motivated to find new solutions to specific problems, needs and circumstances 12. In
the highly globalised and interconnected world, know-why and know-who matters
more than know-what 15. Know-what or the explicit knowledge, which can be codified,
is diminishing in relevance. Know-why or the tacit knowledge gained from experience
and Know-who or social relations/networks are increasingly becoming important.
Knowledge of who knows what and who can do what is at times more important to
innovation than the scientific principles. Knowledge networking can help speed up and
improve new product development, educate customers, brand building, etc. Sharing
best practices across the organization can cut costs and raise quality.
On-going learning is vital for organizations and individuals alike. Learning means not
only using new technologies but also using them to communicate and share with other
people to foster innovation. The findings of Al Jacobson and Laurence Prusak’s
research on costs of knowledge interactions 7 suggest that IT investments and search
technologies work, but can yield only marginal benefits in comparison to some
employees who are more adept than others at gathering knowledge and customizing it
for their own use. The focus of learning’s should be on acquiring and disseminate this
tacit knowledge and techniques, which cannot be acquired by formal education and
training.
1.5.3 Implement an efficient innovation and information system
Intuition becomes increasingly valuable in the new information
society precisely because there is so much data.
- John Naisbitt
Economic theory indicates that technical progress is a major source of productivity
growth and an effective innovation system is key for such technical advancement 4. An
innovation system refers to the network of individuals, rules and procedures that
influence the way by which an organization acquires, creates, disseminates and uses
knowledge. Traditionally it is believed that innovation can happen only in R&D labs
with years of scientific research. Although this is still true in some industries such as
pharmaceuticals, but emergence and advancement of new technologies and
industries in the knowledge economy proves that innovation is not confined to a select
few. It can happen anywhere. Innovation occurs at all stages of the design and
delivery of a product, service or system and is closely aligned to the management of
knowledge and the ability of an organization to learn. It is an open secret that Google
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8. allows its employees to spend 20% of their time on things that they like to do. The
employees spend this time developing their skills and knowledge, and experimentation.
A lot of offerings and innovations at Google have sprung up in this time. Although,
implementing such a practice might not be possible in all industries, but it is essential
that organizations and managers provide people with a platform and environment to
try out new things and encourage them to improve and innovate. The sense of
purpose and accomplishment also goes a long way in employee satisfaction and
retention of talent.
Innovative tools and techniques along with Information and communication technology
seem to help managers tide over the overwhelming flood of information. However,
quite often these means themselves become an end if not implemented properly. One
of the studies indicates that it took people on an average nearly 25 minutes to return
to work task after an e-mail interruption 5. This not only affects personal well being, but
also decision making, innovation, and productivity. Hence, it is critical to implement
robust information and communication systems and optimize the information flow in an
organization.
1.5.4 Knowledge management
A decision is the action an executive must take when he has
information so incomplete that the answer does not suggest itself.
- Arthur William Radford
A knowledge management framework is increasingly becoming a recognized priority
in organizations as diverse as A&D, Automotive, High Tech, Medical, IT and in
virtually every industry in the knowledge economy. With the rapid changes in
information and communication technologies, globalization, shorter product lifecycles
and cost reduction pressures, etc. the need for them has never been stronger before.
Today, more and more companies are appointing chief knowledge (information)
officers. The primary objective of this role is management of knowledge as a strategic
asset and a focus on encouraging the sharing of knowledge 13. However, it is essential
that we start looking at every employee as a knowledge manager as each employee is
involved in creation and maintenance of knowledge repositories, influencing the
culture of an organization toward improved knowledge sharing, reuse, learning,
collaboration and innovation.
In an increasingly competitive environment, where new business practices are
regularly introduced, organizations have to be innovative to survive. Such innovation is
dependent upon companies developing effective knowledge management internally as
well through external interaction. In order to exploit the potential of the 'knowledge
base' organizations need to engage and develop specialists with the ability to
implement knowledge management practice to aid the survival and growth of
organizations 13.
1.6 Conclusion
In conclusion, this paper has provided an insight on what does data, information and
knowledge mean in the context of knowledge economy. This understanding can be
mapped onto businesses in any industry to identify where do they lie in the spectrum
from data to wisdom. This understanding can be leveraged to make strategic
decisions for that business.
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9. This paper also discussed key challenges of managing in knowledge economy and
knowledge elicitation. The key message is that age old management practices are not
good enough to deal with challenges in knowledge economy. Robust information and
communication systems, effective innovation systems, on-going learning, building
internal and external knowledge networks and a strong knowledge management
framework are vital for survival in knowledge economy. Above all, as we understand
that knowledge resides in people’s mind, honing people management skills to keep
them motivated and encouraging them to innovate is the key to success going forward.
1.7 References:
1. Alexandrau Mario, “The knowledge Economy”,
http://www.mariosalexandrou.com/business-management/the-knowledge-economy.asp
2. Botkin Jim, and Davis Stan, “The Coming of Knowledge Based Business”,
Harvard Business Review, 1994
3. Barnes Robert, “A Critical Look at Critical Chain Project Management,”, Project
Management Journal, December 2003
4. Derek H. C. Chen, and Carl J. Dahlam, “The Knowledge Economy, the KAM
Methodology and World Bank Operations”, World Bank Institute, 2006
5. Hemp John, “Death by Information Overload”, Harvard Business Review, 2009
6. Houghton John, and Sheehan Peter, “A Primer on the Knowledge Economy,
Centre for Strategic Economic Studies”, Victoria University, 2000
7. Jacobson Al, and Prusak Laurence, “The Cost of Knowledge”, Harvard Business
Review, 2006
8. Mauborgne Renee, and W. Chan Kim, “Fair Process: Managing in the
Knowledge Economy, Harvard Business Review, 1997
9. Powell Tim, “Competing in Knowledge Economy”,
http://www.knowledgevaluechain.com/2010/01/03/competing-in-the-knowledge-
economy/
10. Prof. Emeritus Harold Ramkissoon, “Challenges Facing the University in a
Knowledge Economy”, TWAS 19th General Meeting, Mexico, 2008
11. Weber Alan, “What’s so new about the New Economy?”, Harvard Business
Review,1993
12. “Advancing Knowledge and Knowledge Economy”, National Conference, 2005
www.advancingknowledge.com
13. “Knowledge Management for Innovation”, Masters Course Description, Cranfield
University
14. “Our Competitive Future: Building the Knowledge Driven Economy”, Department
of Trade and Industry, London, 1998
15. “The Knowledge Economy”, Ernst &Young,1999
http://www.med.govt.nz/templates/MultipageDocumentTOC____17256.aspx
16. “The Policy Challenges of Globalization and Regionalization”, Policy Brief No. 11,
OECD Development Centre, Paris, 1996
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10. 1.8 Author(s) Profile:
Kishor Himane, PMP, MSc (Cranfield University, UK), B.E. (Pune University,
India) is an adept techno-manager with proven track record of successfully
delivering solutions globally. He has managed range of projects including new
product development, cost optimization, product data management (PLM,
including SaaS model) and intellectual property management for MNCs.
Email: hkishor@hotmail.com; hkishor@gmail.com
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